Judge nearly grants summary judgment, changes her mind

An 11-year-old false claims case hangs on by a thread after counsel for the plaintiff convinced a federal judge to stay her tentative ruling on summary judgment Monday, giving relators 45 more days to clarify evidence, while the jurist encouraged the sides to mediate.

Filed separately in 2008 by two former employees and consolidated in 2011, the suit alleges Kinetic Concepts Inc. defrauded Medicare programs by altering medical billing codes surrounding its vacuum wound therapy.

While U.S. District Judge Christina Snyder's ruling was never publicly disclosed, she seemed to reason that since the government was aware through disclosures of the company's billing practices, and continued to grant claim reimbursements, she was inclined to dismiss the case.

However, after hearing oral arguments Monday from the whistleblowers' attorney, Mark I. Labaton of Glancy Prongay & Murray LLP, Snyder ordered her ruling be stayed for an additional 45 days, so she could further examine evidence included in Labaton's motion to add two additional claims.

Defense counsel Gregory M. Luce of Skadden Arps Slate Meagher & Flom LLP and Affiliates, representing Kinetic Concepts Inc., was not pleased.

"Your honor, I am dismayed at the request for 45 days," Luce said. "They say they have their information, they say they have it now. ... Again, it's a do-over; it's what this relator has done for 10 years."

U.S. District Judge Christina Snyder

The case, which has precariously persisted since being filed, was dismissed in 2012 after a federal judge ruled the allegations brought by one of the accusers were based on information already publicly disclosed. In 2013, previous counsel for the whistleblowers, Mark Allen Kleiman, failed to abide by California bar standards for "privileged documents" and was disqualified from further proceedings. U.S. et al., v. Kinetic Concepts Inc., 08-CV01885 (C.D. Cal., filed March 20, 2008).

However in 2015, after Labaton took over the case and filed an appeal, Judge Carlos Bea and an en banc panel of the 9th U.S. Circuit Court of Appeals reversed the district court's decision, narrowing the reach of two significant bars to bringing qui tam lawsuits under the False Claims Act.

The panel ruled under the "public disclosure" bar the "original source" exception does not require the "whistleblower" to have played a role in the public disclosure.

"This company knew in 2002, 2003, 2004 that they had no right to bill under these provisions, and they failed and failed and failed to get it changed and they billed anyway," Labaton said during Monday's hearing. "I do believe the tentative missed some material facts,"

After the case was sent to Snyder, both sides filed motions for summary judgment: Kinetic Concepts requesting a dismissal, the whistleblowers requesting judgment on two additional claims.

Snyder said while she would likely disagree with Labaton, she granted him an additional 45 days to clarify evidence included in his motion despite strong objections from defense counsel.

"One thing I am clear about is that however I rule in this case, grant or deny summary judgment, there will be an appeal," Snyder said in closing. "This case had been on appeal for most of your lives, and if I deny summary judgment, there will be a trial and then it will likely be appealed. I would encourage you to pursue any steps towards mediation."